By: Robert Altman, III, Esq. | Attorney
Unfortunately, the adage “what doesn’t kill you makes you stronger,” is not exactly accurate for all life lessons. Sometimes, your mistake is devastating and there is no recovering from it. Period.
To be clear, I am not talking about a situation where you choose between two reasonable choices and the option not chosen would have proven to be more beneficial. Rather, I am getting at a situation where the choice is between doing something you know, or should know, is likely in your best interest, and doing something that amounts to betting it all on black at the casino. That is exactly the decision you are making when you choose between obtaining a title insurance policy or taking a risk and not protecting your investment.
When I first started out as a lawyer a file came across my desk which left a lasting impression on me. Nearly a decade later I can still hear the voices of the then homeowners who, when they called me, were inaudible because their voices were shaking so much. The basic facts of the matter are simple enough:
Seller sold her property to Buyers, who obtained a mortgage to purchase the property. The lender for Buyers obtains a Lenders Policy of Title Insurance. The Buyers do not obtain any policy of title insurance. A year goes by and everything is great. The Buyers receive a notice in the mail that a mortgage note is in default, with a lender they had never heard of, and that the mortgage and therefore the property was going into foreclosure. The Buyers call the title company, which informs them that the mortgage was released per the abstract report provided by the title searcher and provide them with the release. The Buyers contact the mortgage company which sent the notice regarding the release and the mortgage company informs the buyers that the release is fraudulent. The Seller had recorded a fraudulent release of her mortgage and absconded with nearly $400,000. The mortgage company takes legal action to nullify the fraudulent release and proceeds with foreclosure naming the Buyers (the current owners) and the Buyers’ mortgage lender.
What happens next is the cost or benefit of the decision discussed above. The Buyer’s mortgage lender filed a title claim on their lenders policy and was made whole within the month. The underwriter (insuring the claim under that policy) hired an attorney which pursed the Seller for fraud, etc., located the Seller and commenced a costly litigation to reclaim over $300,000 for the amount paid out to the Buyers’ mortgage lender. The Seller’s mortgage company proceeded with the foreclosure action, obtained and sold the home, recovering a portion of what was owed to them. The Buyers…lost everything.
In the above case, the Buyers only choice was to hire an attorney, they could not afford, to pursue a person who was already being pursued by their mortgage lender’s loan policy underwriter. In total, the Buyers lost their down payment, all built up equity, the value of improvements being made to the property, and tarnished the happy memories of buying a home and building something together.
When I first started at Northwest Title, I read a piece of literature (below) that is passed around with various ways a person can lose their home (or lender can lose their investment) if they don’t have title insurance; I made it to #2 and a chill went down my back. Lesson learned.
Common Title Problems:
1. False impersonation of the true owner of the land
2. Forged deeds, releases, etc
3. Instruments executed under fabricated or expired power of attorney
4. Deeds delivered after death of grantor or grantee or without consent of grantor
5. Undisclosed or missing heirs
6. Misinterpretation of wills
7. Deeds by persons supposedly single but secretly married
8. Birth or adoption of children after date of a will
9. Surviving children omitted from a will
10. Mistakes made in recording legal documents
11. Deeds in lieu of foreclosure given under duress
12. Deed of community property recited to be separate property
13. Errors in tax records, e.g., listing payment against wrong property
14. Undisclosed divorce of spouse who conveys as consort’s heir
15. Marital rights of spouse purportedly, but not legally, divorced
And many more.